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December 11, 2019

US, Mexico, Canada create long-awaited trade deal to replace NAFTA

The US, Mexico and Canada have finally created a new trade deal to replace the historic North American Free Trade Agreement (NAFTA).

By Dean Best

The US, Mexico and Canada have finally created a new trade deal to replace the North American Free Trade Agreement (NAFTA).

The US-Mexico-Canada Agreement (USMCA) has been signed off by officials from the three countries following a number of amendments to satisfy each parties’ concerns that emanated from talks concluded more than a year ago. 

It still needs legal approval from government authorities in each of the member countries.

US trade representative Robert Lighthizer said: “Thanks to President Trump’s leadership, we have reached an historic agreement on the USMCA. After working with Republicans, Democrats, and many other stakeholders for the past two years we have created a deal that will benefit American workers, farmers, and ranchers for years to come. This will be the model for American trade deals going forward.”  

During the talks, Trump had threatened to leave NAFTA unless he got more favourable trade terms to protect US manufacturing and prevent jobs from going overseas amid trade deficits with both Mexico and Canada.

The Office of the US Trade Representative (USTR) noted that “important improvements in the agreement will enable food and agriculture to trade more fairly, and to expand exports of American agricultural products”. 

Under USMCA, US dairy farmers will now have new export opportunities as Canada provides access for fluid milk, cream, butter, skimmed milk powder, cheese, and other dairy products, according to the USTR. Canada will also eliminate tariffs on whey and margarine and allow entry for poultry and eggs from the US. All other tariffs on agricultural products traded between the US and Mexico will remain at zero. 

In return, and a compromise that would help trim the US trade deficit, Canada has agreed to apply charges on exports of skimmed milk powder, milk protein concentrates and infant formula.

However, Canadian dairy farmers were not so happy. Dairy Farmers of Canada tweeted: “Dark day today for Canadian dairy. USMCA not only concedes further access to our market for dairy and oversight of our domestic system but will also effectively cap global dairy exports.”

However, with the USMCA almost in hand, Trump tweeted the pact will be “the best and most important trade deal ever made by the USA. Good for everybody – Farmers, Manufacturers, Energy, Unions – tremendous support.” 

Meanwhile, Canadian Prime Minister Justin Trudeau tweeted: “Great news for Canadians, Americans, and Mexicans: all three countries have signed an agreement on amendments to the new NAFTA. We’re one step closer to full ratification, expanded trade, and more jobs & opportunities.”

According to the National Pork Producers Council (NPPC) in the US, Mexico and Canada accounted for 40% of US pork exports last year, representing US$1.3bn and $765m in value terms, respectively.

Its president David Herring said: “Mexico’s approval of USMCA changes proposed by the United States is welcome news for US pork producers and all of American agriculture. Members of Congress can count on on hearing, yet again, from pork producers as NPPC is unleashing a grass roots call to action. We want a vote this year and NPPC will score this critically important trade agreement as a key vote.”

With respect to geographical indicators for food products, the three countries agreed to provide “important procedural safeguards” and to establish a “mechanism for consultation between the parties on future GIs pursuant to international agreements”, according to the USTR. And Mexico agreed not to restrict access for US cheeses labelled with certain names.  

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